Can a NJ seller require a non-refundable deposit from the buyer as a sign of good faith?

Asked by Roxie, New Jersey Fri Aug 1, 2008

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Eric Einholz, Agent, Keansburg, NJ
Mon Oct 15, 2012
I am amazed at how many realtors give WRONG answers. Attorney review is not mandatory in NJ, I have closed sales without attorneys. i WOULD LIKE TO SEE THEM SITE THE NJ REG !!
0 votes
Victor Kamin…, Agent, Edison, NJ
Sun Aug 3, 2008
NOTE: We are talking about New Jersey here to everyone who cares to chime in on this topic.

Roxie, are your referring to a good faith deposit on the purchase of a home when you sign a contract or are you referring to some sort of fee the realtor is charging you to show houses?

There are a lot of schemers out there and quite a few discount brokerages and others alike concocting all kinds of new commission plans because this is niche in the market place for those shopping for low fee agents to work with. As a result some of these agencies can’t pay their overhead and need to charge for other things like showing homes to buyers.

It's getting pretty ridiculous actually but this is how some agencies choose to run their business and I can’t knock them for trying new ideas to see what works for them. I only have problems when they put down other business models usually the full service brokerages to try and boast how much better they are.

If a realtor fee is not what this is about and we are talking about the purchase of a residential not a commercial property then NO, the good faith deposit is absolutely refundable. It is what it is, a "Good Faith" deposit which is the buyers effort to show good faith that at this point in time they intend to follow through with the purchase of the property. Anyone telling you otherwise has no clue what they are talking about.

If I were you I would mention this to your attorney, ask the Broker of Record or office manager at the real estate brokerage as well. There should be no problem for them answering this question forthright.

Last option is to contact the NJ real estate commission and ask one of their investigators if this is allowed or common. I can tell you for one it is not but do your own research because I don't know the particulars of your case.

Good Luck,


--
Victor Kaminski
Broker of Record
Marivic GMAC Real Estate
2056A Lincoln Hwy. (Rt.27)
Edison, NJ 08817-3330
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0 votes
Kenneth Verb…, Agent, PRINCETON, NJ
Sat Aug 2, 2008
Roxie, this is one of the few times I would say you definitely should ask your attorney. (I know it flies against attorney review which is a requirement of NJ contracts) Possibly the deposit could become non refundable after a certain period of time (known as due diligence) This would have to be clearly laid out in the terms of the contract though and accepted by both parties. Non refundable deposits are common after due diligence on commercial and land deals I have done. I have never seen one on a home sale though I suspect in auctions this might happen.
0 votes
Laura Gianno…, Agent, Manahawkin, NJ
Fri Aug 1, 2008
I have heard of a non refundable deposit on a lease to purchase. The deposit is held in a separate account, and used as part of the downpayment at closing. If the parties do not make it to the closing table, the deposit is forfeited.
0 votes
Joan Prout, , Basking Ridge, NJ
Fri Aug 1, 2008
Roxie,
If you are working with a licensed real estate agent (as opposed to dealing with a seller directly), all real estate sales contracts (1) must be in writing and (2) are subject to an Attorney Review period of at least 3 business days after both parties have signed. No contract of sale is binding until that period is concluded, and during Attorney Review either party can cancel the deal entirely, by having their attorney just write a letter to that effect. The lawyer doesn't even have to give a reason. Deal dead. Any deposit money goes back to the (non)buyer.

The same rule actually applies to leases drawn up by NJ real estate licensees. Tenants who use an agent and give a non-refundable deposit to "hold" an apartment get the same 3-day attorney review to back out and get all their deposit money back.

You, as a consumer, don't have the same protection is you deal with a seller directly, but a real estate attorney could probably get even a non-refundable deposit back if you withdraw your offer on a property. Maybe.

Joan Prout, MBA
Broker Associate
RE/MAX Villa REALTORS
Jersey City, NJ
mailto:Joan@JoanProut.com
800-671-0596x1
Web Reference:  http://www.JoanProut.com
0 votes
Marc Paolella, Agent, Succasunna, NJ
Fri Aug 1, 2008
Hi Roxie,

No buyer in his right mind would sign up for that. It sounds like you are looking for a guarantee. It does not exist. If you sell your house to someone, there is always a fairly good chance the deal will not close. That's just the nature of the beast and you have to roll with it.

-Marc
Web Reference:  http://www.marcpaolella.com
0 votes
Jeremy S. Hi…, , Cherry Hill, NJ
Fri Aug 1, 2008
I think the question really is- Would it be acting in good faith if a buyer was to give a nonrefundable deposit with no contingenicies? I believe not. There are no circumstances I would ever offer a non-refundable deposit on any purchase. Have you ever heard of what's called win-win or no deal. Well if a deposit is non-refundable then certainly this would be in favor of the seller. Making such a requirement would likely scare many buyers away. I don't know your intentions in asking this question but I do suggest you make sure you get legal advice so that your interests is protected and you do not cause a future headache for you or someone else.
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